An informed and thought-provoking analysis of what lies behind the headlines and headaches of business ethics and corporate social responsibility

Friday, August 23, 2013

The “IT-Industrial Complex”

A while ago we commented on whistleblowing in the context of Edward Snowdon’s revelation of the current practices of the NSA. The entire story though is much bigger and has been ongoing for a while now. Just Monday this week, Glenn Greenwald’s partner got detained at London’s Heathrow Airport in a rather unusual manner. Greenwald, as most of us will know, is the journalist who was contacted by Snowdon and has been publishing the crucial pieces of Snowdon’s material in The Guardian.

While in essence the ongoing revelations have the political sphere as the key target, it now more and more emerges that the role of private businesses is far bigger than so far known. From the perspective of scholars interested in business ethics then this case, as it unfolds, raises some rather daunting questions, which – besides being troubling from a normal citizen’s point of view – offer some challenging questions for further research.

1. A new industry

Ever since the Washington Post published Top Secret America we are aware of the fast growing security industry which was created by the US Government in the aftermath of the terror attacks of 2001. What was not that clear is however how far the reach of this industry has gone.

The fact that phone companies provide their records to the NSA, that in principle all our email traffic is public and stored somewhere - just to name a few aspects - takes the entire debate to a new level. It now emerged that in fact most wireless phone providers, many internet service providers (including Google and Facebook) share data with the NSA, as do many classic IT hard- and software producer such as Apple and Microsoft.

When these revelations were made it was conspicuous to see the rather muted reaction of these companies. For long we thought that Google, certainly in their varied approaches to Chinese censorship struggled for an ethical approach here; with regard to their own government though very little of these, in essence similar, concerns obviously played a role. The main defense of these companies overly seems to be the need of compliance. While that argument might carry some way, it is not understandable how for instance Apple, who as a ‘footloose’ company manages to deal with ‘compliance’ to tax legislation in very creative ways just caves in with regard to the privacy of their ‘users’ when the NSA asks for access to their accounts.

So what we see here is not only the emergence of a new industrial sector, which combines rather diverse set of companies (see the list of companies in Top Secret America); it is also not clear anymore where the lines between private business and public administration/government lie. After all Snowdon himself was employed by a private company many of us would primarily remember as a strategy consulting firm (Booz Allen Hamilton). While the blurring of lines between sectors is nothing new, the level and dimensions of the 'securocracy' currently dismantling in front of our eyes in the context of the NSA takes it clearly to a new level.

2. The business model and its ethical implications

Ethical issues in the IT industry have garnered attention for a while in business ethics. Given the numerous court cases, for instance Google and Facebook had to weather recently in the US and Europe it is clear though, that with the growth of the internet and the degree, to which the internet is morphing into a social space, many more questions will arise.

Given that we now know that Google, Facebook, Apple and others are not only basically supplying the government with information but have been monitoring, searching, and organizing our data all long it raises some new questions. In particular it raises the question about the very essence of their business model from an ethical perspective.

Lets stick to the Facebook example. We are told that basically the company will make its money through advertising. Looking at the pathetically annoying adds on our Facebook feeds, for instance, the question really is whether this is the whole story? $800bn for some potentially ingenious advertising platform?

As Facebook ‘users’ we know that we are not their customers. We are their suppliers. What they ultimately want to ‘sell’ is information. This, rather than advertising, is ultimately the business case. This similarly applies to Google, Yahoo, Apple and other who store and ‘use’ many of the data we create through our various internet usages. Most of it is ‘free’ so far, yet still these companies are worth billions of dollars.

This raises some questions, which admittedly can easily be confounded with conspiracy theories. The most important of which is that under the post 9/11 legislation the ‘harvesting’ of our data which for long had been prohibited, is now in full swing. These companies are not primarily in the business of social media, web search or email hosting – they are sources of data about the most intimate details of our lives. While this was always clear to those who bothered to read the small print of the ‘Terms and Conditions’ of these companies, it emerges more and more that this is not just material of value for marketing purposes.

Just today we read in The Guardian that in fact many IT companies such as Facebook, Google, Yahoo, and Microsoft made millions out of providing the NSA with our data. The euphemistic term for this is to see it as a reimbursement for ‘compliance costs’ – but from the perspective of those companies’ CFOs, what else is this other than ‘revenue’? This is certainly the first hard proof that there are clear financial ties between the US government and these companies. But could this also be another hint at what the real business model of these companies is about?

3. The Political role of business

That corporations are political actors in societal governance beyond their direct economic role is by now well established. Looking at the IT-industrial complex though adds some aspects. First, and very much on the surface, it strikes one to see the close ties between senior executives in the industry and the current US government. Eric Schmidt (Google CEO) had and still has key roles in the Obama administration to the degree Google has been called the 'Halliburton of the Obama Administration'; Sheryl Sandberg (Facebook CFO) worked for years in Washington, most notably with Larry Summers.

These are just two examples. Looking at the ferocious reaction to whistleblowers recently, one cannot overlook the commonality of interests between the US ‘government’ and the IT industry. Obama winning a second election was seen by many as a proof that maybe – despite of new campaign financing laws for corporations – business influence on politics is limited and that money alone cant buy campaigns and determine election outcomes. But maybe Obama’s re-election is just THE showcase of what ‘Citizens United’ has done: it got the very president elected whose campaign was crucially supported by Silicon Valley, but whose government now appears to be all long deeply engaged and intermingled with this new industrial network.

As business ethics scholars we see here a new opportunity for research. It is foremost about understanding the structure and value creation models of this industry. But it is also about evaluating the implications of these changes for our democracy, for how society is governed and what the rights and status of citizens in this context morphs into. In short, it is a research field rife with ethical question and issues.

Translate

Follow by email

Andrew Crane [L] and Dirk Matten [R]

Welcome to the Crane and Matten blog - for informed commentary and expert analysis on the everchanging world of corporate responsibility.

We are two business school professors best known for our books and research articles on business ethics and corporate citizenship. We wrote the Crane and Matten blog from 2008-2015, offering unique insight on a range of issues from across the globe.

Andrew Craneis Professor of Business and Society in the School of Management, University of Bath.

Dirk Matten is the Hewlett Packard Chair in Corporate Social Responsibility in the Schulich School of Business, York University.